Technical Market Report

The good news is:
• The weakness that began two weeks ago ended abruptly last
week. The move was strong enough to turn nearly all of the short and intermediate
term indicators upward.

The first chart says it all. Summation indices are running totals of oscillator
values. When the oscillator is positive the summation index rises and when
the oscillator is negative the oscillator falls. There are three summation
indices shown on the chart below, they are constructed from NASDAQ advances
and declines, new highs and new lows and upside and downside volume. All three
had turned down a week ago. The rally last was enough to turn all three upward.
I have said repeatedly it is imprudent to bet against the summation indices
when they are all headed in the same direction.

A 10% trend (19 day EMA) of NASDAQ new highs is a short term direction indicator.
It is most useful when prices and the indicator move in opposite directions
on a daily basis. The discrepancy is usually resolved in favor of the indicator.
The indicator turned upward last week after a brief fall.

There are a couple negatives that will make next week interesting.

1) The NASDAQ composite and most of the small cap indices were up four consecutive
days as of Friday. Since this rally began in mid August the composite has been
up four consecutive days three times including last Friday. Each time has marked
the end of the sharpest part of the rise. The chart below shows the NASDAQ
composite in red and an indicator showing the percentage of the preceding four
trading days that have been up.

2) Seasonality. Because of limitations of my software, the tables below include
the first day of October which was last Friday as well as the following 5 trading
days. The first day of October skews the large cap average very positively.
Excluding the first day of the month, both averages have a negative bias for
the second through sixth trading day of October, but have been up a little
more than half the time. That is the down years, although slightly less frequent,
have been more severe than the up years have been positive.

First 6 days of October.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.
The number following the year represents its position in the presidential cycle.

R2K

Day1

Day2

Day3

Day4

Day5

Day6

Totals

1988-4

-0.87% 1

-0.02% 2

0.21% 3

0.11% 4

0.24% 5

0.01% 1

-0.32%

1989-1

0.35% 1

0.30% 2

0.01% 3

0.30% 4

0.29% 5

0.18% 1

1.43%

1990-2

1.33% 1

0.50% 2

-0.77% 3

-0.27% 4

-0.69% 5

0.05% 1

0.14%

1991-3

-0.03% 2

-0.17% 3

-0.87% 4

-0.12% 5

-0.75% 1

0.23% 2

-1.71%

1992-4

-0.81% 4

-0.97% 5

-1.58% 1

0.71% 2

0.09% 3

0.68% 4

-1.90%

1993-1

0.02% 5

0.22% 1

-0.19% 2

0.50% 3

-0.11% 4

-0.04% 5

0.40%

1994-2

-0.52% 1

-1.35% 2

-0.79% 3

0.06% 4

0.47% 5

0.71% 1

-1.41%

1995-3

-1.09% 1

-0.97% 2

-1.05% 3

0.13% 4

0.20% 5

-1.72% 1

-4.50%

1996-4

-0.31% 2

0.83% 3

-0.27% 4

0.59% 5

-0.13% 1

-0.42% 2

0.29%

1997-1

0.19% 3

0.49% 4

0.56% 5

0.47% 1

0.45% 2

-0.03% 3

2.15%

1998-2

-3.73% 4

-0.09% 5

-3.69% 1

-1.26% 2

-3.10% 3

-3.71% 4

-15.59%

1999-3

-0.88% 5

0.73% 1

-0.14% 2

0.88% 3

-0.38% 4

-0.09% 5

0.11%

2000-4

-1.86% 1

-1.37% 2

0.56% 3

-0.95% 4

-2.32% 5

-0.30% 1

-6.24%

2001-1

-1.80% 1

1.06% 2

2.84% 3

0.92% 4

-0.50% 5

-0.67% 1

1.86%

2002-2

1.61% 2

-2.14% 3

-0.94% 4

-2.49% 5

-2.78% 1

0.60% 2

-6.14%

2003-3

2.59% 3

0.58% 4

1.80% 5

0.87% 1

0.78% 2

-0.98% 3

5.65%

2004-4

2.11% 5

0.00% 0

0.00% 0

0.00% 0

0.00% 0

0.00% 0

2.11%

Averages

-0.22%

-0.15%

-0.27%

0.03%

-0.52%

-0.34%

-1.39%

Winners

41%

50%

38%

69%

44%

44%

53%

SPX

Day1

Day2

Day3

Day4

Day5

Day6

Totals

1988-4

-0.19% 1

-0.28% 2

0.46% 3

0.19% 4

2.09% 5

0.06% 1

2.32%

1989-1

0.49% 1

1.09% 2

0.63% 3

0.01% 4

0.51% 5

0.28% 1

3.02%

1990-2

2.90% 1

0.09% 2

-1.21% 3

0.41% 4

-0.38% 5

0.64% 1

2.45%

1991-3

0.35% 2

-0.24% 3

-0.98% 4

-0.84% 5

-0.46% 1

0.31% 2

-1.86%

1992-4

-0.36% 4

-1.40% 5

-0.71% 1

-0.10% 2

-0.72% 3

0.87% 4

-2.42%

1993-1

0.51% 5

0.01% 1

-0.03% 2

-0.10% 3

-0.34% 4

0.25% 5

0.30%

1994-2

-0.21% 1

-1.55% 2

-0.24% 3

-0.26% 4

0.61% 5

0.87% 1

-0.77%

1995-3

-0.46% 1

0.11% 2

-0.15% 3

0.20% 4

-0.02% 5

-0.71% 1

-1.03%

1996-4

0.26% 2

0.72% 3

-0.18% 4

1.25% 5

0.27% 1

-0.38% 2

1.93%

1997-1

0.86% 3

0.53% 4

0.48% 5

0.79% 1

1.07% 2

-0.94% 3

2.78%

1998-2

-3.01% 4

1.64% 5

-1.40% 1

-0.40% 2

-1.41% 3

-1.16% 4

-5.74%

1999-3

0.01% 5

1.70% 1

-0.25% 2

1.85% 3

-0.59% 4

1.39% 5

4.11%

2000-4

-0.02% 1

-0.68% 2

0.55% 3

0.14% 4

-1.90% 5

-0.49% 1

-2.41%

2001-1

-0.23% 1

1.23% 2

1.99% 3

-0.25% 4

0.16% 5

-0.83% 1

2.08%

2002-2

4.00% 2

-2.36% 3

-1.08% 4

-2.24% 5

-1.91% 1

1.69% 2

-1.90%

2003-3

2.23% 3

0.20% 4

0.94% 5

0.44% 1

0.47% 2

-0.53% 3

3.76%

2004-4

1.52% 5

0.00% 0

0.00% 0

0.00% 0

0.00% 0

0.00% 0

1.52%

Averages

0.51%

0.05%

-0.07%

0.07%

-0.16%

0.08%

0.48%

Winners

59%

63%

38%

56%

44%

56%

59%

For the short term, the best part of the rally that began last Tuesday is
probably over and seasonally next week is slightly negative, but with most
of the intermediate and short term indicators turning positive the downside
risk should be minimal.

I expect the major indices to be higher on Friday October 9 than they were
on Friday October 1.

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron's and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
notice.